SPONSORED CONTENT PRESENTED BY VERITRAN
By Greynier Fuentes, VP of Digital Solutions at Veritran
CIOs across industries have faced rapidly shifting priorities over the last two years as technology has become an essential factor in long-term business strategies. The traditional CIO role involves overseeing and managing an organization’s IT systems. However, this role is expanding—many were forced to balance the growing need for technology investments, dealing with an uncertain economic landscape and recovering from COVID-19. For the first time, many CIOs are now elevating responsibilities to marry their organization’s business and digital strategies.
The financial services industry has not been exempted from these shifts. Financial institutions need innovative technology leadership more than ever, enabling them to compete in a market amid unprecedented change. And against the backdrop of an impending recession, today’s banking leaders must focus on the bottom line and expanding growth. As they do so, there’s one segment of market that remains largely untapped by traditional banks: self-employed workers.
Why does the self-employed segment matter?
According to Celent, 33.2 million small businesses represent a big revenue opportunity for financial services. The self-employed segment is becoming more diverse and rapidly expanding. It’s growing from traditional professionals such as accountants, lawyers and entrepreneurs to freelancers, influencers (Instagrammers, YouTubers, etc.), and gig economy workers (such as Uber/Lyft drivers, mystery shoppers, and food delivery workers).
According to the BLS, nearly 17 million Americans are self-employed—and this number is only continuing to grow. It’s possible that a flexible job will soon be as typical as the traditional 9-to-5. Self-employed workers are quickly gaining spending power and looking for financial services that meet their unique needs, meaning that now is the time for banks to capture market share early.
Key considerations for banking CIOs
As CIOs at traditional financial organizations start thinking about converting self-employed into loyal, long-term customers, leveraging the correct technology that considers the financial needs of this segment will be crucial. Some important considerations for CIOs include the following:
- Recognizing unique needs: Self-employed workers have different financial needs than traditional employees and individual preferences – for example, many have inconsistent paychecks, prioritize the ability to leverage digital tools over in-branch banking, and may need more help quickly accessing capital in case of a business, health or family emergency.These circumstances, among many others, are unique to the self-employed segment. It’s important to note that when creating solutions targeted at this group, banks must first have a solid understanding of their needs and how to meet them potentially.
- Accurately evaluating risk: Historically, banks have avoided targeting self-employed workers due to the higher difficulty involved in risk assessments for serving this group, from approving a loan application to obtaining credit. As a result, over a third of self-employed workers feel they have been negatively impacted and neglected when accessing financial services.However, technology and open banking today make it easier for banks to get a more holistic view of this segment’s income and creditworthiness. Banking CIOs should be sure they’re tapping the correct evaluation technology and criterion to ensure they’re accurately evaluating risk, and making their solutions for self-employed workers as inclusive as possible.
- Partnering with a vendor: Financial institutions should consider tapping into fintech or third-party vendors who have pre-existing solutions that can be tailored and personalized. This can help to quickly create a market-ready product targeted at self-employed workers.One recently released solution, Fusion by Veritran, is the first wallet that allows customers to manage their personal and business lives in one single app, uniquely meeting the needs of small businesses and self-employed workers. When considering creating a customer-centric banking solution, tools like this (that meet a previously unrecognized demand) should be top of mind.
The bottom line is that traditional banks are far overdue to offer innovative technology solutions that meet small businesses and independent workers’ unique needs, an often-underserved group in our society. For financial services CIOs to work towards a more inclusive and profitable future, their long-term strategy must include the self-employed market.